Amidst the flood of red ink on Friday, a couple of retailing results stood out: solid final results from Harvey Norman, and from the country’s biggest car dealer, Automotive Holdings.
Centro Properties tossed out a $2.05 billion loss, its retail arm, Centro Retail, more than $880 million, Allco Finance Group over $1.7 billion, Babcock and Brown Power, over $450 million, with smaller losses from miner, CBH ($29 million) and property developer, Raptis group, nearly $14 million.
But share prices don’t grow from losses, unless the company or companies involved are very lucky: Raptis is, CBH perhaps, Centro Retail could survive, but will probably be dismembered along with its associate; Allco is heading to the knackery.
Babcock and Brown Power should survive, but it would have a better chance with other investors and not Babcock and Brown in the manager’s seat.
But the results from Harvey Norman and Automotive Holdings are more important, because they are continuing growing businesses, operating in a couple of sectors that pretty tough during the six months to June.
Both are creating wealth and jobs, not destroying them.
Harvey Norman said its net profit after tax and minority interests for its “underlying business operations” was $295.14 million for the year to June, compared with $260.35 million for the 2007 year, a rise of 13.4%.
That compares to the same figure being ahead more than 25% at the half way mark, a sign of the impact the slowdown in spending and the continuing housing slump (seen in group sales for the second half which also slowed) had on the country’s biggest consumer entertainment and technology retailer.
High petrol prices didn’t help either as they forced consumers to cut spending on non-essential goods and to stay at home.
Harvey Norman centres depend on people driving to them for business.
The company said that its "integrated retail, franchise and property system has placed us in an extremely strong financial position. We have been able to reduce our gearing and funding facilities to record low levels.
“We have the capacity and ability to take advantage of emerging opportunities.”
A final dividend of 7.0 cents a share was declared by directors, up from the 2007 final of 6 cents. That took total dividend for the 2008 year to 14.0 cents a share fully franked compared with 11 cents a share for 2007.
Harvey Norman said the franchising operations segment result before tax for FY2008 was $291.41 million compared to $242.62 million for FY2007, an increase of 20.1%.
Franchisees sold goods valued at $4.86 billion in 2008, compared with $4.50 billion in 2007, up 8.1%. The franchising operations margin for FY2008 was 6.00% compared to 5.39% for FY2007, an increase of 11.3%.
Directors commented that "during the half-year ended 31 December 2007, the retail environment was extremely buoyant enabling us to post a very strong profit result."
"The last six months however, have been challenging with deteriorating global factors, such as the capital market liquidity crisis, contracting monetary policy, high inflation and petrol prices negatively impacting consumer sentiment.
"Despite the challenging second half trading conditions, Harvey Norman franchisees and controlled entities increased market share in key product categories, consolidating our position as market leaders in these key product categories.
Directors said that the underlying business operations of the consolidated group "are exclusive of one-off transactions and the net revaluation increments recorded in the group’s property portfolio.
"The total property revaluation uplift recognised for investment properties in Australia and properties held in joint venture entities for the current year was $102.28 million before tax ($71.60 million after tax).
“The property revaluation increment for the Australian investment properties and properties held under joint venture agreements for the preceding year was $65.35 million before tax ($45.74 million after tax).”
Harvey Norman shares rose 6 cents on Friday to finish at $3.71.
High petrol prices and interest rates also hit the car industry, but Automotive Holdings Group Limited, the country’s largest automotive retailer, has managed to post a record underlying net profit of $48.4 million for the 12 months to 30 June 2008.
The company said the result "came on the back of strong performances throughout the group’s automotive retailing and logistics divisions in the face of some challenging market conditions.
Underlying group revenue for the year was up 53% to $3.4 billion from $2.2 billion previously. The second half performance resulted in an underlying EBITDA for the June half of $60.0 million representing 52% of the full year total.
Underlying group EBITDA margin was 3.4% compared to 3.15% previously, achieved through periods of high growth and market volatility.
Underlying earnings per share were 25.3 cents, up 29.5% on 2007.
The Directors have declared a final dividend of 10 cents, bringing the full year fully franked payout to 17.25 cents – up 38% on the previous year.
But as strong as the results were investors were inclined to sit back on Friday: Automotive Holdings shares finished all square on $1.90.
AHG Managing Director Bronte Howson said; "the 2008 performance was strong against the backdrop of higher interest rates, rising fuel prices and a decline in consumer confidence.
“Our automotive retailing division performed very strongly through the year however we did see slowing towards the end of the financial year.
“Revenue for automotive retailing rose by 52.7% to $3.0 billion and EBITDA for the division rose by 64.7% to $96.1 million.
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